What is an Interchange Fee?
Every time you process a credit or debit card payment, you pay an interchange fee, sometimes called a swipe fee. Interchange fees are set by the card networks and typically represent about 80% of the total cost of processing card payments. All interchange fees are passed to the bank that issued the credit or debit card used in the transaction. For instance, if a customer uses a Chase Sapphire Preferred Card, then the interchange fees are collected by JP Morgan Chase Bank. Interchange fees pay for the points, miles, cash back and general rewards that we receive from using our credit cards. Interchange fees also represent significant source of revenue and profit for issuing banks.
Optimizing payments to lower these fees is essential for any merchant looking to enhance their margins. In this guide, you will learn what are interchange rates, the average interchange fee, and how to lower your costs.
The customer swipes their credit card with the merchant to make a purchase.
The merchant sends the transaction to the acquiring bank who takes a cut.
The acquiring bank sends the transaction to the issuing bank who takes a cut.
The aquiring bank sends the completed transaction back to the merchant.
What is an Interchange Fee
These fees cover the issuing bank’s costs of offering payment products to consumers and businesses, and also pay for rewards, fraud and risks borne by the bank.
But what is an interchange fee?
While a swipe fee is unavoidable if your business chooses to accept card payments, there are actions you can take to lower your costs. Comparing merchant service providers, harnessing the power of data via Optimized Payments, and finding the right pricing model can lower your costs.
Examples of Common Fees
1.4-3.25% for credit cards
1.5-3.25% for credit cards
2.3-3.5% for credit cards
1.55-2.5% for credit cards
Interchange Fee Rates
Credit vs. Debit
Interchange fees for credit cards are always significantly higher than those for debit cards. The reasoning behind these higher rates is that credit card transactions are much riskier for issuers.
Debit cards are also less expensive due to regulations/caps imposed by the Durbin amendment.
Type of Card
Type of Sale
Merchant Category Code (MCC)
Take advantage of Optimized Payments’ proprietary analytics platform and professional payment consulting services to leverage the data you already have. We have helped some of the biggest household names save millions, including Apple, Charter Communications, and Verizon.
Request your free demo to discover how you can become the hero of payments at your organization.